Sea loses steam amid mega US$2.57 billion offering

Shares of Sea Limited - which owns Shopee and Garena- slipped from record highs ahead of the issuance of new shares to fund business expansion.

  • Sea will sell new securities at US$195 each in a public offering
  • Shares of the e-commerce, fintech player faltered after the announcement
  • The fresh capital may go into its new digital bank in Singapore, analysts say
  • But sceptics believe the digital bank may still worsen cash burn

Equity dilution dampens investor sentiment

Sea Limited’s stock ended last week on weaker ground, following a statement that it plans to raise US$2.57 billion through the issuance of new public securities on the New York Stock Exchange.

In response to the move (which tends to dilute existing shareholders' ownership stake), investors sold down the e-commerce, gaming and fintech stock. It slipped 2.8% to finish at US$193.38 on Friday (11 December), after having declined 1.6% on Wednesday and 1.8% on Thursday.

Just a week ago (04 December), optimism from Sea receiving one of Singapore’s coveted digital full-bank (DFB) licences helped Southeast Asia’s most valuable counter rocket to an all-time high of US$198.78.

New share deal upsized on strong demand

Sea initially proposed on Thursday (11 December) to issue 11 million new American Depositary Shares (ADS), each representing one Class A ordinary share, in an underwritten public offering.

The next day, it upsized the offering to 13.2 million ADS ‘to address strong investor demand’, pricing the new shares at US$195 apiece.

The underwriters, led by Goldman Sachs and JPMorgan, may also buy another 1.98 million ADS, which will yield US$386 million at the same price.

Proceeds from the offering, closing on 15 December, will finance business expansion and ‘potential strategic investments and acquisitions’, Sea said.

According to Bloomberg Intelligence analysts, this new capital could be used for the digital bank or to speed up its e-commerce and gaming investments.

Tailwinds from Sea’s new digital bank

The DFB will be able to take deposits and provide banking services to retail and corporate customers.

DBS Group Research, which maintained a ‘buy’ call on the stock and upped its target price to US$228, said the DFB will accelerate regional growth in Sea’s digital financial services.

Adjusted revenue for SeaMoney, the digital financial services arm, should thus post a 124% compound annual growth rate for 2019-2022, based on DBS analyst Sachin Mittal’s projections.

Millennials using Sea’s gaming platform, Garena, ‘might find it comfortable’ to also maintain a bank account with the company, he added.

And being able to both take customer deposits and serve as a lender for merchants on Shopee - its e-commerce division - will give Sea an edge over its e-wallet competitors, DBS said.

In the same vein, Jefferies expects Sea to initially focus on financing e-commerce players, through working-capital financing, cash management, cross-border payments, and payrolls. Jefferies has a ‘buy’ call and US$216 target on the stock.

How to trade Singapore stocks with IG

Are you feeling bullish or bearish on Singapore shares?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <company name> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get commission from just 0.08% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.